Non-compliance of Section 133(6) notice by the lender alone could not be a basis for treating the loan as non-genuine

 

The Kolkata ITAT in the case of Unique Finance & Securities Pvt. Ltd. v. ACIT, Circle 7(1), Kolkata, dt 13.05.2025, – ITA No. 110/KOL/2025 has held that non-compliance of Section 133(6) notice by the lender alone could not be a basis for treating the loan as non-genuine.

Let us have a Short Overview of the case:

Facts:-

The case was reopened under Section 147 on the ground that the assessee was a beneficiary of accommodation entries in the form of unsecured loans amounting to ₹8.42 crore. The AO issued statutory notices and obtained responses, including audited balance sheets, profit and loss accounts, income tax returns (ITRs), bank statements, confirmations of loan transactions, and documentation pertaining to the lender

Despite these details, the AO concluded that the assessee failed to establish the creditworthiness of the lender. Ratio Distributors Pvt. Ltd. had reported a negligible income and modest financials (a loss of ₹26,103 and share capital of ₹1.11 crore). Further, the AO noted that no response was received from the lender to the notice issued under Section 133(6). Consequently, the loan amount of ₹7.22 crore was added to the assessee’s income as unexplained cash credit under Section 68.

The CIT(A) dismissed the appeal and upheld the AO’s action, citing that the assessee was the recipient of accommodation entries. The CIT(A) also referred to a list of case laws relied upon by the AO but did not provide an independent assessment of the documentary evidence submitted by the assessee.

Assessee’s Contentions the issue was already covered in its favor by the coordinate bench decision of the ITAT Kolkata in ITA No. 355/KOL/2024 dated 01.04.2025 for AY 2017–18. In that case, the Tribunal had deleted an addition of ₹1.74 crore made in respect of loans received from the same lender – Ratio Distributors Pvt. Ltd.

The assessee emphasized that complete documentary evidence had been filed during the assessment proceedings, including:

Loan confirmations Audited financials of the lender ITRs of the lender
Assessment order under Section 143(3) in the case of the lender
MCA master data, municipal tax receipts, and bank statements

The AR submitted that the AO did not find any discrepancy in these documents. The only ground cited for the addition was the non-compliance of Section 133(6) notice by the lender, which alone could not be a basis for treating the loan as non-genuine when extensive documentation was provided. It was also submitted that the loan was partially repaid in the same year and fully discharged in subsequent years.

Revenue’s Argument
The addition was based on solid evidence and an investigation showing that the lender lacked financial capacity and received funds from other dubious entities. assessee was a beneficiary of accommodation entries.

Court Ruling:

The court in the concluding part of the judgement held as under:

“Since, the facts of the case of the assessee in the present year are quite similar to the facts in A.Y. 2017-18 beside the case of the assessee being squarely covered by the above decisions, therefore, we are inclined to set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition”.

The copy of the order is as under:

1747129682-4Sa7MF-1-TO